UK Rebounds; Tesco Earnings Rise 11%

123jump.com Staff
30 Sep, 2008
New York City

UK stocks rebounded after a record one-day loss in trading on Monday in recent times. The financial stocks rebounded on the hopes that the U.S. will act soon on the troubled bailout plan. Tesco reported 13% rise in sales in the first half and 11% increase in earnings.

[R]1:00PM New York, 6:00PM London – After record decline in previous session stocks rebounded in London. Tesco reported better than expected earnings. Consumer sentiment remains weak.[/R]

London market averages rebounded from yesterday''s slump on expectations that the U.S. will expeditiously act to approve the amended version of the Emergency Economic Stabilization Act.

Market Sentiment

In London trading FTSE 100 rose 1.74% or 83.68 to 4,902.45. Of the 102 FTSE 100 stocks 81 rose, and 21 declined. ICAP Plc led advancers in the index shares with a rise of 22.73%.

U.K. Consumer Sentiment Eases

Researcher Gfk Group reported on its Web site the index gauging consumer sentiment in the U.K. eased to –32 in September from –36% in August. Analysts had forecasted the figure to drop to -42

The index measuring the economic situation over the past year gained -69 to -62, while the index for the next year increased to -40 from -46.

FSA Investigates Short Selling

Bloomberg News reported today on its Web site that the Financial Services Agency will be carrying out investigations to try and establish abuses in the short-selling practices that regulators alleged had contributed to some of the instability affecting the market.

Short-selling is the practice where investors sell shares they don''t own in anticipation that the price will fall.

The FSA banned short selling to January 16 and now requires daily exposure of existing short positions in financial companies of more than 0.25%.

The U.S. Federal Bureau of Investigation is also making criminal investigations into 26 companies such as Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc. and American International Group Inc. for possible accounting misstatements.

Pound Rises

The Pound rose 1.7% to 78.44 pence per euro as stocks were revitalized by rising expectations that U.S. legislators will be able to pass the revised version of the bailout plan that was rejected by the U.S. House.

The euro also retreated after Dexia SA received 6.6 billion euros in financing from Belgium as the bank reels under losses linked to subprime mortgages in the U.S.

Gainers & Losers

ICAP Plc led advancers in the FTSE 100 index shares with a rise of 22.73% followed by gains in Man Group of 10.23%, in Thomas Cook Group of 9.25%, in London Stock Exchange of 9.10%, and Old Mutual of 8.91%.

Old Mutual and other financial stocks gained on expectations that the U.S. will be able to revive the vetoed rescue plan. Standard Chartered gained 8.03% as a result.

HBOS Plc led decliners in the FTSE 100 index shares with a fall of 13.08% followed by losses in Marks & Spencer of 3.24%, in Barclays of 2.32%, in Stagecoach Group of 1.76%, and Centrica Plc of 2.32%.

Fortis Bailout Wont Affect RBS Interest in RFS Holdings

The Royal Bank of Scotland reported on its Web site today that the sales of Fortis interests in RFS Holdings will not affect the integration benefits envisaged by RBS, nor will it affect the businesses to be retained by RBS.

According to the lender, Fortis has already paid in full in cash for its shares in RFS Holdings, adding that should it sell this holding the financial consequences would lie with Fortis.

RBS said the separation from ABN AMRO of the businesses to be acquired by Fortis has been is expected to be completed in the second half of 2009.

Earnings Review

The Game Group plc, electronics and computer said first-half revenues rose 54.11% to £743.3 million from £482.3 million a year earlier. Net profit in the first-half was £23.4 million or 6.75 pence per diluted share compared to net income of £0.9 million or 0.27 pence per share, a year earlier.

The Game Group plc, in the last one year traded as high as 306 pence in May 2008 and as low as 169 pence in November 2007. Based on the yesterday’s closing price the company has a market cap of £655.36 million.

Tesco PLC, the leading grocery retailer said first-half revenues rose 13.25% to £25.63 billion from £22.63 billion a year earlier. Net profit in the first-half rose 11% to £1.04 billion or 13.12 pence per diluted share compared to net income of £938 million or 11.65 pence per share, a year earlier. The sales data does not include value added tax.

Non-food sales growth at UK locations slowed to 4% from 8% in the second half of last year. The largest UK supermarket chain also reported ‘trading loss’ of 60 million from its Fresh & Easy chain in the U.S. and the company predicted break even by the end of next fiscal year.

Tesco PLC, in the last one year traded as high as 494.25 pence in November 2007 and as low as 337.62 pence in July 2008. Based on the yesterday’s closing price the company has a market cap of £29.86 billion.

Tesco added 4.75% or 17.70 pence to 387.60 at close in London trading.

Europe Markets Review

In London FTSE 100 Index closed higher 83.70 or 1.74% to 4,902.50, in Paris CAC 40 Index increased 78.62 or 1.99% to close at 4,032.10 and in Frankfurt DAX index higher 23.94 or 0.41% to close at 5,831.02. In Zurich trading SMI increased 154.76 or 2.38% to close at 6,654.89.